Economists see BoJ on hold for now, taper on horizon

Bank of Japan

TOKYO: The Bank of Japan will leave policy unchanged at its board meeting next week, according to a survey of economists by Bloomberg.

Most see the BOJ as done with adding stimulus under Governor Haruhiko Kuroda and are now focusing on how and when the BOJ will start tapering bond purchases and raising interest rates.

None of the 41 economists forecast the central bank will increase stimulus next week, and none forecast any changes to its interest-rate targets or bond buying. Thirty-eight said the BOJ was finished adding stimulus during Kuroda’s term, which ends in April 2018.

The bank’s preferred measure of inflation rose in January for the first time in more than a year, and is widely expected to begin inching toward the 2 percent target this year. Kuroda took the helm of the BOJ in 2013 promising to hit the target in about two years, but almost no-one in the survey said that will happen before his term expires.

Twenty-five of 40 analysts said the bank will either cut its annual target for bond purchases or stop restating the target altogether by the end of Kuroda’s term. The most common view was a reduction to 70 trillion yen a year, which was forecast by 10 people.

Fourteen said they expected the bank to raise its target yield for 10-year government bonds, currently at about zero percent, over the same period.

After spiking last month, the yield has stabilised at around 0.1%, following changes to the purchase program. But if the Federal Reserve raises rates borrowing costs multiple times this year, it would likely put upward pressure on that rate and may force the BOJ to either raise the target or buy more bonds.

The BOJ is concerned about market speculation on the rate and will consider giving more forward guidance once inflation picks up, according to people familiar with discussions inside the bank. - Bloomberg